Professional tax is different from income tax. The central government governs the income tax, whereas the state government governs a professional tax. There are many differences between these two types of taxes. Union Territories are not supposed to pay professional tax.
The professional tax is paid to the state government, whereas the income tax is paid to the central government. And union territories are considered under the central government. Lets have a look at difference between professional tax and income tax.
Professional tax is governed by the state government and is imposed only on individuals who earn income through practising their profession. People like doctors, engineers, teachers, or accountants must pay professional taxes based on the tax rates. This tax varies from state to state and may change accordingly.
On the other hand, income tax is imposed by the central government on Income for business owners and employees who earn income from various products or services and their jobs. Income tax is a mandatory Tax for NRI every individual, and it is non-negotiable. The income tax rates are the same in each state, as the central government manages it.
What is Professional Tax?
It can be defined as a tax imposed by the state government on all the working professionals in a state. Each state declares different slabs, and the people are supposed to pay their taxes based on these tax slabs. Whereas there are few states which don’t change any professional tax. Also, union territories are directly managed by the central government. Hence, they also don’t pay any professional tax.
This tax is supposed to be paid by each individual in a state. The calculation of this tax differs from state to state, and the amount collected is also different. This tax is paid by dividing the annual professional tax of an individual into 12 different instalments. These instalments are paid every month. The inception month of this tax is February; hence, the tax is higher this month.
There can be scenarios where an individual’s income sources can decide different taxes in addition to the professional tax. The employers collect a certain amount of professional tax from the employees. Then the employer pays the collected professional tax to the government. If the employer fails to do so, it can lead to penalties for not abiding by the law.
If an individual doesn’t work for an employer, he must fill out a form to pay professional taxes on time. After filling out the form, a registration number is received, and with the help of this number, one can pay the tax in the bank. In some states, the government even provides a rebate for a couple of years if the tax is paid in a lump sum.
Hence, one must know the rules regarding professional tax in one’s state. This was some brief information about professional tax. One can check the different tax slabs for other states on the internet with the help of the government’s website.
If an LLP’s accounts require auditing under section 44AB, it is mandatory for them to file their income tax return electronically using a digital signature, and this can be done through ITR 5. Click here – ITR for LLP
What is Income Tax?
The income tax is the tax imposed by the central government on working-class individuals and businesses based on different laws. According to the law, every taxpayer must file an ITR (Income Tax Return) every financial year to determine different tax obligations. Income tax acts as a significant source of revenue for the government. These taxes are then used to serve many public demands like food, transport, and communication.
Use the Income tax calculator on Vakilsearch to quickly calculate your taxes and submit your ITR.
In most countries, the income tax rates progressively increase for higher-income people, which are lower for lower-income people. The central government collects income tax and uses it for different purposes. Union Territories only pay income taxes under the central government’s control. In India, income tax is paid yearly for the respective financial year. For example, from the 1st of April 2021 to the 31St of March 2022.
There are different income taxes based on the occupations and services provided by an individual. This includes individual income tax, business income tax, and the state. All these taxes are paid to the central government. Any person with an income tax of more than INR 10,000 is supposed to pay the income taxes in 4 instalments. This norm is given by section 208 of the Income Tax Act.
Difference Between Professional Tax vs Income Tax: –
The significant difference is in the receiver of these two different taxes. The central government receives income tax, and the state government gets the professional tax. Then the constitutional provision of the income tax is Entry number 82 of the Union list of the constitution of India. And the professional tax comes under article 276 of the constitution of India.
The income tax varies from individual to individual. At the same time, the professional ta was first imposed in the year 1949. And the rate was INR 250 per year. Now it is raised and is INR 7500 per year. This number is different for different tax slabs. One must research more about these two taxes and note the significant differences.
These fundamental differences can be used to distinguish between professional and income tax. As a responsible citizen of India, one must pay all the taxes on time and keep all the records clear. This will not only help the government to work more efficiently but will also make you a responsible citizen of the nation. One must also file an ITR 4 filing to be more professional while paying different taxes.
Conclusion: Difference Between Professional Tax and Income Tax
Hence, this was detailed and brief information about professional and income tax. The difference between a professional and income tax must be clear. One must take these taxes seriously and pay all of them on time. To know about these taxes, one can research on the internet and take help from a taxation firm.
There is an Indian law firm called ‘Vakilsearch’ which can help in getting more knowledge about these taxes and their different norms. This firm can also help file an ITR, legally save taxes and many other services. Vakilsearch is India’s leading legal, tax, and compliance services platform.
They have worked with more than 50,000 customers giving them positive results. They also have registered at least 10% of the total Indian companies. Hence, this makes their services more trustworthy and efficient. With their team of highly qualified lawyers, charted accountants, and many other professionals, they can help in solving any legal, taxation, or compliance issues efficiently.
Frequently Asked Questions
Can we claim professional tax in ITR?
Yes, you can claim professional tax as a deduction in your Income Tax Return (ITR). For salaried individuals, the amount of professional tax paid by the employer is deductible under Section 16(iii) of the Income Tax Act, reducing the taxable salary income.
How is professional tax calculated?
Professional tax is calculated based on the income slabs set by the respective state government. It is typically a progressive tax, with higher income earners paying more. The tax is deducted monthly from the salary of employees and is capped at a maximum amount, varying by state.
What are the two types of professional tax?
The two types of professional tax are: (1) professional tax on salaried employees, where the employer deducts and pays the tax to the government, and (2) professional tax on self-employed individuals, where the individual is responsible for calculating and paying the tax based on their income.
What is professional tax as per income tax?
Professional tax is a state-level tax levied on individuals earning an income from salary or practising a profession, such as doctors, lawyers, and chartered accountants. It is deducted from the employee’s salary or paid by self-employed individuals and is allowed as a deduction from taxable income.
What is the salary limit for professional tax?
The salary limit for professional tax varies by state. Generally, individuals earning below a certain threshold are exempt from paying professional tax. For instance, in Maharashtra, employees earning up to ₹7,500 per month are exempt, while those earning above this threshold are liable to pay professional tax.
Can we get professional tax back?
No, professional tax is not refundable. It is a mandatory tax imposed by state governments and is deducted from an individual’s salary or paid by self-employed professionals. However, it can be claimed as a deduction from taxable income in the Income Tax Return (ITR).
What if I don't pay professional tax?
If you don't pay professional tax, you may be subject to penalties, interest, and other legal consequences as per the rules of the respective state government. Non-payment can also lead to issues with compliance and potential difficulties with tax authorities.
Who should pay professional tax?
Professional tax should be paid by all individuals earning an income from salary or practising a profession, including salaried employees, self-employed professionals, and business owners.
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